Jack in the Box (JACK) 21 Nov 192019 Q4 Earnings call transcript

Company Profile

Participants

Lenny Comma	Chairman and CEO
Lance Tucker	EVP and CFO
Rachel Webb	VP of IR and Strategic Analysis
Brian Bittner	Oppenheimer
Gregory Francfort	Bank of America Merrill Lynch
John Glass	Morgan Stanley
Dennis Geiger	UBS
Katherine Fogertey	Goldman Sachs
David Tarantino	Robert W. Baird
Alex Slagle	Jefferies
Bob Derrington	Telsey Advisory Group
Jon Tower	Wells Fargo
Andrew Charles	Cowen and Company
Jeff Farmer	Gordon Haskett
Lauren Silberman	Credit Suisse
Matt DiFrisco	Guggenheim Securities
Peter Saleh	BTIG

Call transcript

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Operator

Good day, everyone, and welcome to the Jack in the Box Inc. Fourth Quarter Fiscal 2019 Earnings Conference Call. Today’s call is being broadcast live over the Internet. A replay of the call will be available on Jack in the Box corporate Web site starting today. [Operator Instructions].

Analysis opening the introductions, Webb, call Investor and for to would VP time, the Relations turn in now over Strategic this remarks I and like of Box. At Jack for to Rachel Please go ahead.

Rachel Webb

Jennifer, Thanks, everyone. good morning, and

today the CFO, Comma; and Chairman and Tucker. Joining and call CEO, Vice Executive me are on President Lance Lenny

company-operated on the debt restructuring sale of the compensation early operations on termination non-cash is to benefits on the share interest share. of Operating per our this the and comments restaurants, swaps earnings per excluding tax charges, basis, morning, In Act GAAP earnings and share-based per a per excess defined loss rate share gains diluted Tax impact from diluted of share continuing amounts refer losses as earnings from extinguishment, or arrangements.

Adjusted earnings EBITDA allowances. the on impairment operations, amortization, depreciation basis, income or excluding sale and interest GAAP and of discontinued a losses tenant expense, improvement company-owned of restaurants, franchise gains charges, the represents taxes, on other amortization net and

comments measures restaurant-level margin. non-GAAP franchise-level and the release. such refer earnings also may to yesterday’s margin reconciliations Please include non-GAAP as included Our in other

the Following will we take questions community. today’s from presentation, financial

on of our results may we differ Please be that reflect to on information. Actual and the business. based risks current based during the the make future, the materially Q&A for advised these session, forward-looking expectations presentation course may management’s that statements which expectations are from

well call. www.jackinthebox.com. are recent Material most These are and and of detailed conference a XX-Q Form filed public factors, considered on site cautionary The of as Investors XX-K relating to part statement Safe section documents the statement in with news at other Web XX-K, our Harbor recent the operations, our documents in as most the company’s yesterday’s SEC. the available in release this information risk are company

Play will close. We January few Eat, be and morning. first announce market calendar Sunday, York to on Tuesday, management December plan Box February Wednesday, X in Jack Sleep, on attending XX. conference this A tentatively in note Barclays our the on results after XX items New quarter to

conference be Thursday, held Pacific to XX. on AM Time February tentatively call Our at is scheduled X.XX

will And Lenny. turn to I call that, the over with

Lenny Comma

you, morning. Thank good and Rachel,

our Lance reviews highlights recaps year, Before on some accomplished coming XXXX acknowledge quarter and for XXXX. like into the to the how all plan and of to we fourth in guidance I’d success we build

to our with XXXX lower exited and marks XX% being restructuring return completing franchise Jack We in entity, and Qdoba the asset-light. officially establishing efforts agreement branded services transition Box’s now structure. a single a our cost

completed our securitization strategic securitization EBITDA ratio have form returned this share million we’ve structure We of through our of a repurchases. Since and to alternatives implementing leading our target debt in obtained XXX July, to capital Xx. over now shareholders the to new approximately process

performance since implementing By the year our changes, across structural driving the remains Box in XXXX. In achieved time and resources growth team of the devoted with ninth the system sales the these Jack on to strongest we same-store consecutive restaurants. of XXXX, performance focused

net achievements. Now the in and the and brand as on build XXXX are same-store we Box I we look through on of Jack long-term these The to sales to growth plan units. the beyond, focused and team new

and a is innovation, year, operational by as executions, especially we For the there know lot compelling same-store more to room in these performance throughout and encouraged pertains sales, we offers were improvement areas. product it grow our to

cheddar launched of in LTOs burger appeal we the In and fact, to cheese Continuing strategy just new launched we a value-oriented compelling form our bundles add-ons. to combo. this of using value week white bundles guests,

and nice curly guest seeking and provides opportunity success and $X featured Mini of a favorites we Loaded, onion value well & those as promotion the launched just such past on sides Munchies it fries craveable rings snacks to as add-on Sauced This which capitalize support To mozzarella our check. to with such return as sticks. as average

With Jack us with chicken breakfast This offer breakfast to we’ve $X. new in remaining sandwich to relevant the breakfast allows daypart. a success top the featuring chicken innovative introduced the new capitalize mind, growing Breakfast of on while of

taco As we ceiling reestablish lost menu quarters, look to the the price we for that we that are a of we about popular excited of two item when will value raised future new offering. $X.XX addition our everyday

and While promotions our is largest for these experience. focus bring the guests additions restaurants, XXXX our into compelling improving menu single guest

Performance look our at Field Support, VP Services Shannon our of As really Operations his calls, taken I and have operations. on McKinney and team mentioned previous fresh a

removed significant made minor improved other speed his restaurant simplifying complexity equipment and our adjustments and cabinets already team back he the guests. quality the at and identified improvements build to logic retrofitting as and Having preserve have the of of service speed house longer both such which temperature other changes more for build in holding as consistently, brands, sandwiches such of to

We’ve quickly changes improvements XXXX. with have committed by these We of a seen speed locations. on in test to service and average gone remain becoming to these already minute faster

boards we XXXX, components pickup and the new and designated elements, as We of experience. our branding such associated digital tested many with In delivery. parking things enhancing tested drive-thru menu for

are they’re to from we start been with the speed this see have a between to to enhancements starting the we separately, testing benefits point converge. we test getting the crossover As combined where

to finalize and we’ve upgraded later out of said elements program begin experience year. expect the the this we previously, that rolling As

While digit in new committed low-single years. coming long-term are to unit to accelerate growth growth percentage working for the our we guidance, unit we’re

XXXX, exceed new to XXXX. growth For units net our and expect we both

capital revisiting color on our you changes We’re February. in final of that more any stages plan will in the give

you wanted we let allocation. to about capital For how we’re now, know thinking

experience, in are we a which restaurants related First, guest about I mostly prioritizing spoke to bit return-oriented the earlier. investments

in Second, February. enhancing more and discuss unit particularly our of sales unit such we in investing drivers which incentives we are will growth growth same-store as

shareholder remain with these items, value. enhancing conjunction In committed to we

over our We expect XX% outstanding shares five years. next to repurchase approximately the of

I’ll new for turn to over Lance quarter expectations look detailed the at year. that, fourth call the fiscal a more for and our With the

Lance Tucker

few good then I’ll everyone. highlights the into and fiscal a quarter hit and morning, XXXX Lenny, fourth move you, Thank XXXX. guidance and for year from

the lower Operating primarily quarter EPS increase was as was driven well as to G&A by XX% last as repurchases. $X.XX This $X.XX compared fourth year. for share

sales Our XX system-wide the comparable of the sales quarter, company X% sales comp quarter. points. comprised increases fourth increased check transaction Franchise points increased and XXX X% for of in basis increases X.X% cost increased basis of

our the restaurants refranchising. company same last Completion of performance XXXX initiative compares our fourth without quarter year-over-year of the XXX impact from refranchising quarter year, first was any

basis to in XX.X%, from were primarily due commodity California with Remember, XX.X% by specifically higher high-single and digits. to XXX in our Company mid increases wage This decrease locations in last down inflation. to year. the XX% decreased company-owned points restaurant-level cities of higher margin costs inflation increases was and wage leading labor roughly the

approximately increased in the commodities Additionally, X% quarter.

quarter. million make quarter sales increased year’s fourth the versus any this company funding performance. SG&A, due costs, by incremental approximately recast Advertising last The decreased contribution margin in included last Franchise-level $X.X compared which primarily in million by the $X not by with of stronger are did contributions figures year. company driven XXXX funded to

fourth quarter. a points in by in after below percentage was jury verdict quarter as XX run the well benefitting rate fashion targeted a in our the That fourth basis unfavorable was of verdict G&A one-time the reduced $X.X approximately system G&A third an quarter sales in million.

year, full litigation now on our the is financials the this impact For immaterial. from

guidance came from G&A from life our at year the in benefitted insurance year system which X.X% insurance of also and as of prior company-owned We well lower X% using cost policies. recast the was sales, lower of Full than X% in to quarter our figures. for as lower gains than X.X%

comp of our XXXX for company-owned of over $X a due and lower lower insurance over worker’s incentive G&A $X lower life insurance from million, to was than compensation. million policies cost mainly gains

million approximately securitization, million X.X Since the includes X.X shares million $XXX approximately which $XXX million implementing the for fourth in over repurchased for quarter. shares we have

$X quarter return more track by fourth to remain on shareholders to the Excluding year, last million of than we XXXX.

franchised the pushed of and online the in opened rest XXXX. of restaurants. restaurants into bringing XX, all these of first first since restaurants should new come the to Six Several have in total opened Premium year-to-date units quarter. quarter which our were the quarter

XXXX rate approximately at Our in remains low X.X%. fiscal closure

As to stress, me expect XX-K report Form to fiscal our weakness controls. identified we no have release, general yesterday’s for noted in been Allow material IT there misstatements press XXXX financial in relating statements. our to in

is receive to later expect a the We or clean today. audit opinion when unqualified XX-K filed

remediated expect have to already collective weakness material the the efforts Our fiscal within year. and begun we have

how Please today keep on financial first we’ll quarter QX adoption refer guidance yesterday’s accounting be statements. Now standard for more mind information for this XXXX the guidance standard. on ASC of new the lease shared without fiscal in impacts reflects to release XXXX. XXX. The the will timing, standard move Please of to our year our this

digit between to what the for margins as the inflation. and experienced approximately X.X% X% high-single improvements. sales driven the similar X% wage compelling expect is We Guidance well same-store for product a we XX%. inflation of of for operational XXXX approximately by assumes fourth combination restaurant-level as and innovation, commodity This year, grow to year quarter in of

$XXX of expected and percentage in as G&A for XXXX. million $XXX Guidance is as SG&A percentage system-wide adjusted come X.X% is of compared is as $XXX and EBITDA to in a X.X% for revenues Guidance with between X% approximately million XXXX. a for X.X%. to between million sales

XXXX, single costs wage we we well than higher digit commodity inflation. continued For in experienced as are expecting as XXXX

any comp of We benefits benefitted from policies also insurance life significantly worker’s not which adjustments, XXXX. or do both G&A in forecast company-owned

tenant improvement million combined on Guidance $XX allowances million to for approximately is and expenditures basis. capital a $XX

openings, we For to are net to be both gross our versus XX which low franchise XXXX. improve XXXX, to we relatively new sponsor With restaurants. openings unit XX and rates, of gross likely expect expect all

fuel to around the support our counts they retooling on to, currently as the incentive make in unit calls. investments Lenny I’ll acceleration share To this franchisees details plans enhanced more we upcoming help our that brand. spoke are structure in incentive further

that improvements our ahead across we spend long-term have capital go in that We more guidance. total and new this and will however planned not we expect incentive do to in share previously and CapEx

you of unit now However, think that growth. previously expected fuel dollars be really to redirect tenant towards as improvements should used will a this go of franchise and to

line for now prepared concludes Jennifer? to our call This questions. open like over to the to the remarks. operator turn I’d the

Operator

you. Thank Instructions]. [Operator

Brian first question with is Sir, open. your Oppenheimer. Bittner from is line Our

Brian Bittner

Could comparison A with how morning. cadence Obviously the I your sales guidance your us than second a on of Good throughout lot year? the question comps provide different up. follow about of faces thinking same-store for And a the have Thanks. half. XXXX. half you’re you first

Lance Tucker

and with start I’ll morning. like. jump let good he’d this one if Lenny Brian, in

focused to guidance guidance on our on we’re be going long-term and annual only. really So our

going So say to X%. to we’re X.X% it’s

of beyond the But details looks way second trying that, like. bit to a lot away easier quarter-to-quarter a We’re in business. little than running kind year you the into as getting of going feel as look as way what the from we not compares year. term are the the of to first go in they Clearly and the the like far guidance a that long actually or of cadence cadence take at half half the would giving we’re to are giving

Brian Bittner

shoring unit to Okay. thinking on about still is grow in as acceleration with up? Lenny naturally want acceleration, what economics improved that’s how this of growth both the closures, And appreciate changes product more and the is it. openings happens on color is unit and they’re post-refranchising just unit opportunity how I this any any or driving this the actually there the franchisees

Lenny Comma

Brian. Thanks,

a capital we I had natural existing have also have buy completed, units. you when the effort of capital But that to a that of lot a gone towards think evolution more changes structural new think that But that can there’s we of of lot will investing do. go sort franchisees and units. is some is now through lot

developing by also the And focused of the teams unit that’s continue will and operational future, done to sites time. team drive on on the some group how growth rate are so which enhance simplicity and as Shannon I think being their the work or efficiently as building some of into well growth around Lance accelerate to about over talked new

Operator

question next comes from Francfort Our with of Gregory Bank America.

Your line is open.

Gregory Francfort

a It franchisee some talked and little seems pressure your been margins question. and Thanks more a bit that guys. there’s terms in bit flow being that cost recently but on the might franchisees for that’s might be down year, on to franchise in suggest or relationships this this more has specific. a investment How what clearly industry focus there of of be you of comments you do you How giving you franchisee cash like on Hi, bit maybe are Thanks. out going an Jack not forward? different? That’s guidance thinking approach are based. about approach think equipment different an pricing to and plays that or or pressure

Lenny Comma

meet conversation. with engage about the show franchisor where of profitability to most quarter road we stores. topic our Because We’ve important. them coming our are once company-owned just the got high things We to actually this here on obviously a of a have will actually next as as this of be need up be about just shows think in franchisees we the concerned our overall as road franchisees weeks and a are percentage that couple comes and from that

there well that some out the it overall in And pressures same so boat increased sort all wage minimum to comes profit competitive margins. the strain are the on the as puts when that we’re as of

pulling we’re not profit be on currently and labor changing is that of motion that’s out the but this think and/or penny eliminates labor I associated back or a required. of it running reducing house the So the and rate in the focus some we’re associated that procedures way way the product with the is, time whether promotions looking just with also of the at either

but get to sure margins got what couple efforts sure look the make bolster of a from sort this we’re there’s aligned going to of the and and that more we’re we a looking our all engage to going the we internal that. operators same-store lens around stay said, make keep sales needs not forward. it from as them. weeks honest next think also at largely are and appropriate to of now. an the we’re as in in have right work doing only at make such Like eyes aligned from in that franchisees us done So into I I the taking well sure we this But that We’ll here outside urgency even trying lot hearing in going we to

Gregory Francfort

And maybe just a follow that. up to

your growth thinking be competitors factoring Are below check ways to that clearly or X%, X%, running in and an aggressive maybe guys of Some are little that. a taking average about a are you in? you is is pricing X% up more not opportunity that

Lenny Comma

a dangerous right that’s little now. think I

check tell industry, not that the is still happening really entered choppy. seeing If same marketplace term. competitive Most check. the out away. us over brand the and that long health time of fact, that’s the marketplace, at overall you term in look offers of have the extremely to we’re that’s sensitive throughout are has years gone that this way don’t transactions that growth in happening attempting through price grow environment I the business many recently And think the think very the long the to through grow we’ve I healthy gone for

between between that that some drive price want don’t that’s most transaction so around a good a brand like balance mix the indication healthy there’s You both. term. would overall because other sacrifice to see I I and momentum transactions can I probably of health. seen maybe the best that of short do recently to we’ve think growth, activities

Operator

you. Thank

Our comes from next Morgan Glass question John Stanley. with

Your open. is line

John Glass

forward going Thanks. it longstanding on comps. Can have it do quarter just a policy? Historically to case and fiscal practice. Is new some the now the Is been that’s – provided confirm? current chose you It’s new why color I year, more it? just not

Lance Tucker

I’ll John, one. it’s take that Lance.

But start annual longer-term over very think really it guidance view and [indiscernible] trying [both away X, comps it knocks We’ve into done getting really quarter the and ways] into historically. view kind business type down really it you X focus we’re X, to of as takes from I how on [ph]. the short-term it’s kind view do of is a giving what doing.

we long we think just term, stick So business our to that decision which driving sense. focus made and going the we’re on more a makes guidance to annual

John Glass

Okay.

Lenny Comma

As the have completion internally now structural XXXX, we’re changes many long on you been look and completed so term. the at focused of

a those one focus the Street same keep that’s that also going direction. behind why focused of of kind to the commitment to we’re outcomes us think internally on distractions to putting reasons of a make just we’re to the going that lot of I try is in for

John Glass

then comments money. the years of or next And up but Okay. and allocating way your out TI you’re in on ranges clarify the follow over it’s just change CapEx to be of the so you goals different said in CapEx, from going your put to going to the you’re couple not you

asking you new going CapEx reallocating lead are you’re it finished to by you And that for into of just specifically to just development think more as about incentives know remodels about do refranchising, you – want stores? going spend conceptually your resources it company way, on talk is you I I are more or Can if way going you’re you that is to you to – the maybe more know in build unit how franchisees you or actually to but it, development? reallocate rethinking it? to you you’re philosophically example? but are sort So to incent or like put

Lance Tucker

with and in like start It’s Lenny he’d to. Lance. let if jump I’ll that

noted unit we’ve case But of they planning in some categories. all, this will businesses. as we’re invest to worst going all a we programs have we’re to to any in across more in than to going are support you we of in to in With as you due already more tell changes going spend around and alluded that not little kind would I made expectations their of most completed to, give this us as franchisees have First allow likely the incentive February what the the more and those we capital that form after really were dollars some deploying area. we said growth guidance our said, spend into of remodels is

Operator

question next Stifel. Our O’Cull comes with from Chris

open. Your line is

Unidentified Analyst

Thanks. actually [ph] for It’s Hi. Alec on Chris.

margin seeing do strategy question the shift any an noticeable add-on order? in a Thanks. of year? the any your makeup rates, attach value next Are performing you anticipate of on given Just how you pressures similar sort or

Lenny Comma

Alec. Thanks,

snacks promote we are that they that value type driving get consumer that’s the the and la add-ons value and bundles We seeing the sides food our there see still as that are times decent the We is having of price. but from an carte that allow behavior sold often like. they out consumer we item more for à than do add-ons a than looking of are reasonable quantity a to at the

marketplace sides their We there also with our a average And successful. bolster selling and competitive $X value are out to that the be proven very suggestive those way like it a very holes operators offer that add-ons be that for in value deteriorating but the and that’s margins. often us in have in allows to carte some not à marketplace, very are that’s discounted do has that sandwiches competitive, be be to bundles and then a snacks really allow items donut way are the that check other to la us

the And so year. it the to deploy types way accompany in throughout this with the associated this do. thing we’ll profit continue these we offers these overall to definitely believe offers the and is right Any we think that strategy and typically up-sells of

Unidentified Analyst

inflation, then large a question what pretty Great. Thanks. your of that confidence portion That’s basket guided last gives outlook? but cost of the you’ve in precise is is food floating given And kind you helpful. to

Lance Tucker

X% like. going comfortable that drastically of going, guess four. bit. a we’ve would to we adjust kind little up figures spend today’s reasonably a based bit or this on the our based of Alec, it’s right If guidance. feel down, think I something But our little looks commodity But side one. to kind we’re I is either we on the and start first think that reserve where of Lance. kind what went expect with it know We we inflation ranged number. it be of to right around basket I’ll is

Unidentified Analyst

I Okay, it. great. Thanks. appreciate

Operator

next question Dennis Geiger is from with Our UBS.

open. is Your line

Dennis Geiger

of that the coming for guess maybe see of comp about Lenny, guidance, incremental the those the sales on thoughts outlined. through that on that And happens that, more year, recent if and been it wondering of to? the if I this and you Any I be you could impacting or detail the talk all the all just just guess speed Lenny, sales value in seen service quarters, 'XX and just to anything more item, feedback, Thanks. in Thanks the of operations the the Hi. you some curious a customer on trends maybe bit trends, drivers has question. you’ve feedback, guidance? around XXXX when the important the be basically that alluded how some permanent Lance to momentum bundles, start we’d innovation, shaping franchisee how kind that of it important last benefits value just

Lenny Comma

you, Thank Dennis.

consumer first is we’re What’s in essentially I what’s to the and the is what requesting the answer is question think your secondly what competitive things happening environment. shaping first. thing doing and two last that – is

you’ll on about XXXX to So is to a associated else. healthy Because anything that we’re have for want things talk with we those than ultimately brand, have everything going more if focus to really me hear that.

XXXX snacks that’s drivers the the and value that as bundles of competitive having you’ve I XXXX lineup form particular looks and a sales, lot one sides. the add-ons in got marketplace think in daypart the like same-store far As focuses, of LTOs of part and various

simpler franchisees other the the ramped So is their side is value a we as restoration two think line need you’ll I everyday and focus early and you crews looked is focus new we and in in a what better to the coin that be essentially next things. of improvements of making One make have What that will the focused lost for at continuation implement as we product you’ll is see side addition on operational of some area we really up see performance new as that that then the calendar year. our XXXX. driving in a execution. that the The of saw two XXXX of coin. one operation through to sides And a of

we to are in year execution the all see things our training some helping better throughout drive of the early those year. performance changes and through restaurants we so would as new we in And elements standards, progress communicating to the the expect to

Dennis Geiger

Thank you.

Operator

question next Katherine Sachs. from Our comes Goldman Fogertey with

Your line is open.

Katherine Fogertey

your – yourself you. With about to year at extrapolated guys thinking then thinking and that? how that for sales measuring case, anything a have given potential much for you how are reflected up. new you Thank you of Great. about same-store guidance Are benefit follow and have are regards markets a next you how growth, if of product innovation? kind that’s the that impact? test And I looking results, on And

Lenny Comma

Yes.

achieved to some also of at the at year perform either We’ve see for this as sort product system and for past of to able we XXXX products well. at of operational extrapolated we those and year. we as look improvements initiatives we’ve perspective. should improvements have a performance in of So operational the tests the drive we that the looked expect and from believe this that looked extrapolated some were lineup how We how the

year should confidence well. the and the definitely the assumed that sort of up that that’s approach gives approach So what pretty us we’re you shape that is using

Katherine Fogertey

you’re what eases now on helpful? And we then of crescendo great. or throughout headwind guidance the building commodity then that a expect with so with the seeing here, should much front year, right the year? a that be would Okay, X% kind cadence Any on floating for

Lance Tucker

This is Lance.

fourth So of fourth quarter kind if up was was, the at you range. where in look the that quarter X%

in It’s a kind don’t already right be think business going to built. I It’s unfortunately So now. there’s build. of our

I’ll right lot adjust But is off reserve seeing to right see expect what the if I we now. as earlier, expecting what move start necessary that a start to against X%. don’t we’re said We things variations the So throughout at of year.

Operator

Tarantino Baird. next question comes Our Robert from with David W.

is Your line open.

David Tarantino

And around think as qualitatively I the could on comps business concerns the you you’re first then the I enter about you being degree asked about wondering, the I how quarter-to-date up. morning. overall just And year? you seen you’ve about have there’s in able a this Lenny, move sort recent I quarters of confidence to was guess several pullback sustain understand some I this, But in disclosure follow if talk through of about I philosophy maybe and your the as Good type comp Hi. know and momentum of feeling but year? the have that.

Lenny Comma

Certainly the it around quarter-to-date comps consternation need change. we and why exemplifies a could honestly understand make to of sort

When I and the basis, think week-by-week and to the will operation the us more quarter-to-date efficient. on players is need over When do to we we lineup things a we consumer historically confidence the the the we’ve we’ve the credit things other some industry comps. the look XXXX, we make is has at data, operational and at person, of hyper-focused happens that stated those lost marketplace prior at what it reviews on some the the in improvements for years, card need to tests in, it that of and long off of been the previous at as taking have driven I equities the eye and from term looked that gives positively that looked have regain year we’ve also planned layer looked that impact well. the

people develop and sales go increase need stop I successful stuff what to profit and the out the frankly And isn’t much long and time hell last that do increase holiday or rollovers that we week So, based into too way has put coupon on look being roll as what year. with year’s our the week-by-week the our of prior the make to over great going of to exact as the leader new products didn’t at coupon over going – on business to we term. need concern actually the my them and innovative this the drop market drop all compared quite the sell year’s organization focused in energy and to wasting forward, is things of the data

and So the quarter-to-date. numbers sort got line folks going the sand why of on to to the reason there to we’ve versus in focus drawn that a the annual we’re get I’ve that’s focus

David Tarantino

my makes you. is by I mentioned then of improving Thank you’ve sense. and service speed think minute. of follow about And X up goal improvements that a That the you’re operations undertaking

to provide sales So experience from a perspective benefit mean way that could context might or terms of other the than about what you some just on better? that customer the being in any think

Lenny Comma

with, shared for haven’t we example, of associated numbers past in Yes, the improvement. speed service

will from is I that. to So What away I’m this. say going stay

are drive-thru slower to satisfaction. the the throughput growth industry customer to significant as players three sales compared for there We need best other we quartiles in example, restaurants, one and business overall the significant and growth, and quartile see our is in difference a transaction the of the do improvements, drive and of our of comparison top we make overall

extrapolate in we improvement what So will cushion. build and to some lead the comp we’ve in can overall

the how the they that improvement not team a looked lead what We’re has at each expecting than component that’s business. is in little to perform we’ve the we’ve like every that actually done time quartile would our different restaurant past like it to many studied way seconds change do. and restaurants will this in to top services But around operations

restaurants a of we last immediate put their changes of began the we and already speed the we service. the as those couple we test in in in And will change improvements so can just of that handful and are together, happen weeks seeing the where see

this of of actually the kind positive went into working some science proved out. So is that

that got will couple that, it field. So any we’ll we of rest barring changes then impact. layer consumer the operational But the to make to just begin to over to test lead out that or weeks of those sure disruption the negative next didn’t

pretty designed good feeling move So it’s how testing being as it’s a about and it’s matter so don’t forward. how make and far really so that of mistakes we diligent any we just

Operator

from Bob Group. Our next Derrington Telsey question with comes Advisory

Your line is open.

Bob Derrington

you. Thank

Rachel Webb

you Bob, are there?

Operator

with The comes next just question Jefferies. disappeared. His line Alex Slagle from

is Your line open.

Alex Slagle

daypart? the percentage could of sales come and you respond wondering provide outside competitive to during plan commentary the was next us on activity breakfast for I if you during some Thanks. you morning of sales period the daypart that that could how increased year breakfast if remind

Lenny Comma

So on at the quite got also and be daypart seem frankly night we’re we’ve late on eye very certain but categories to – not what’s product only going trending. breakfast our that

that say at won’t than at offering at at we more advertised a balance and way time just throw we so activity. than the breakfast our of promotions remains want us breakfast all that have certain But other competitive marketplace being impact top have sort the competitors looking same relevant that different I direct looking so approach of breakfast think others, not sure And would out everything I any is likely we’ll so make breakfast of we’re are that on that fear. we’re our the There to and mind.

one the the we in contribution actually of Jack that dayparts. are Box few five For players from all has decent

for prep eggs in Some of the some the I for menu of everything the a for fresh consumers. breakfast brand, other sell that sandwiches cracking making also breakfast, but is at and fresh we’re order on items really is the to particularly think and which XX/X made because we food, differentiator our

the pretty about we in offers, we are feeling ability make to sure space to top have that mind. just our that we’re to the promotional advertising So marketplace in bullish stay compete the of definitely going but

Alex Slagle

digit step outlook, more guess I – wanted not just on what’s increased same inflation up. necessarily the clarify driving And 'XX, helpful. wage That’s in I the to inflation the expected high-single a

Lance Tucker

fairness to I going fairly think be Alex, in it’s similar.

it’s step all. first significant have California. up be fact in a restaurants But in being our it plus we that the So of by XX% won’t driven

a versus company, franchisees about unemployment to looking X%-ish which you’re as even spread got number sure compounds draw whole that you wage you I’m that are. what simply on not more when math issue is inflation. you’ve where looks X%-ish going our the weighted than system think in low that said, for that we’re impacts. economy a straight kind across bit. significant heavily got California, wage system you the that And just an number to to how remember of So very little at or when addition doing like minimum got With

in wide. You’ve speak to industry on heard these and these calls others that chairs

of restaurants as Think there our it California. I step XX% So a don’t if of big said, But up are a up. step I that one. more smaller that is in expect know

wage going we’re So to to be lot inflation. a of subject

Lenny Comma

you our the in is Jennifer, question? him as have queue, if can Bob back next

Operator

absolutely. Yes,

question with from Group. Advisory Telsey next Our comes Bob Derrington

is line Your open.

Bob Derrington

this enhancements must Thank lot the what you’ve a that have color at my you and like Can I’ve look a and thoughts and certainly one spent effort it, up. kind And the shot question positive drive-thru benefit about potential as then talked of you. a have Lenny, I quick around business. seen something some the been you take you not dropped off. I of on sounds kind cadence figured unfortunately at about us you’ve some that? it and follow of going to that’s I give year got liked, and you’ve rollout the in test so of apologize. another quarterly time of To

Lenny Comma

hold coupons, that the as we to that did out won’t we hot or digital was that to extreme I’m cadence say of able to the be last question that menu experience sure needed wait that particularly the get make of Shannon’s going of boards both cold team part merge would the equipment, actually year I to – we we weather. to things because into search But complete overall the far up tested, I from equation we What The are things. digital what One, the be necessary. other last essentially of only to to couple the as that, the a of away those side and as think components will is the field. the want that’s and able with speed we stay

good. that there some also [indiscernible] make branding we were perspective, those and wanted We put that had new out from elements sure to

We take know economical things move return make sort sense test will that most what with, to can the on. think and are we pieces of a XXXX that we forward get of we from most

improvements back bring the faster to those overall lead things of with the start that then those will when come together, we’ll house to two We together speed And roll. of service.

this what’s of the the impact consumer I XXXX probably handling basics. want learning we is don’t to think in just without biggest the some and is with bells try that to and whistles important

some of improving the We’re basics.

on is behalf I of for think the need service is faster our desperate guest. in drive-thru speed improvement moving

other the branding launch elements I like consumer getting think And they feel met drive-thru. go Jack we they’re so Box in when when needs the should the a through more of their

So to that’s what trying achieve. we’re

year expect come we’ll be more together the calls. able components quarterly I the throughout closer say I on the would and think we’re getting as to that

Bob Derrington

Should be of that process. there of the we of stores production – will expect out conversion this come a number that during

Lance Tucker

If changes Bob, of would you production.” this If focused we’re the I’m But undo? we is that I understanding we’ve Lance. come what Wouldn’t generate that I me wrong, rolling on expect think of you the are to there are a components let actually return. question that. out to your “out to I’m mean lot know reading tests made think going mean, be the going

tell and come I As me the asking for to air that’s lot up you’re I backtracking Lenny sure if here. But you’re don’t understand you question said, asking. of I make let that what what if that’s see don’t why a

Bob Derrington

for will some a is on? curious need time this goes period close What you about to stores conversion while of apologize. I’m I

Lenny Comma

have I do, achieve close restaurants days. And achieve. don’t hours to that to would we something we to not we’re that’s if suspect it’s what trying

up reboot to material. disruptions there So with minor for bring could sync we to that’s be and have if of the it component, POS types system and anything shouldn’t things do those but example, things them be online, some digital

Bob Derrington

focus you as other anticipate relates potentially into in of the business breakfast And a important pieces, Box. change the as of competition the an on piece your within it that. we same-store certainly come new to Do marketplace? is Thank sales Jack daypart the you for that seen for cadence guidance, you as

Lenny Comma

about probably thing have most lineup items purchase, breakfast the overall breakfast it’s sell. we positive us our fastest that that of and for time the of great the It a it’s speed best. the is of breakfast and day we really One daypart fresh drive-thru where performs the is habitual also has service

business that one we’re say although is of that in taught stronger And and it to sort it Box. competition, for comes over when So what history just significant the to Jack we’re that give competitors not say our would harder dayparts to is the a piece in we of one out someone has take us the I that the going of to would roll space.

Operator

Our next Wells with comes from question Jon Tower Fargo.

is open. Your line

Jon Tower

Great. Thanks. A couple if I may.

in not to forward. full to ramp guidance understand for year. I shareholder comp quarter-to-date going commentary your base it’s a preference hit your hockey you’re – the I give First, But stick assuming that think not important that the for comps understand

So currently? minimum your a running is at within it safe to you’re say guidance comp

Lance Tucker

given call. going give appreciate we’ve just several wouldn’t I effort said from guidance. want certainly your We but to the Jon, we’re to annual times that deviate what throughout

So it we’re what X in you’ll our in X.X I hope year and in mine comfortable full hearing I year hear number. and confident is think I’m very saying to Lenny’s you’re voice

Jon Tower

clearly but And weaker my a and alternative kind the fiscal third I’m the the curious the could how on if data quarter. frankly, following it fourth data you you have just So data third in tender on tied and might sources that, much Is fourth access understanding be? versus a to wrong? business have was just of is share quarter-to-date. of this quarter any alternative don’t sources perhaps thoughts mix higher cash in we your it’s a to slowdown up that what pointed quarter data these sharp to

Lance Tucker

cash our past knowing versus their based a probably to little with are, question, Jon. be firsthand. don’t tell don’t tender I That’s a and is. you what can have certainly are From What me higher That’s assumption we making all of than you. what competitors bit on out we I aware mix that an not are. It’s I competitor standpoint, data But it’s credit some we’re think credit good we’re we know a the see honest our one there. mixes perception card

Operator

Cowen Our with next from Charles question Andrew and comes Company.

open. Your line is

Andrew Charles

in it time to Thank fact is term? longer coming you. an erosion a more before for And back evaluating you plan to that’s is as or I everyday to it curious, a XXXX what something see if Lenny, repair about LTO, perceptions. you value talked be the limited the making was item? offer planed something need in and longer-term would this

Lenny Comma

in seen it we’ve long-term a enough item. will know to think tests be I that

like support lot to well. will So limited having offer and the behave item as But air that stick time of a a are standpoint digital social planning the from promotional period for being on we around. a and

Andrew Charles

That’s helpful.

to by other Okay, called great. and the script didn’t billion $X to over to make then XXXX. Lance, And aspects any But guidance. out cash reference plans shareholders the return release of you XXXX the of

targets annual two growth I and of to million what $XXX Are still those – for sales be think So just about in elements EBITDA are adjusted XXXX, to digit system implies intact? low-single want I confirm.

Lance Tucker

guidance. no other there would changes we to made of times, have We we to. will couple will our as guidance those in referenced changes I not certainly some given say to called expected the additional some long-term plans, calls the and guidance long-term a we’ve current of around but out have be had long-term upcoming

Operator

Gordon Our next question Haskett. with comes Farmer from Jeff

is open. Your line

Jeff Farmer

have Thanks. two follow-up I actually questions.

So the first one goes longer-term to just guidance. EBITDA that back

XXX of by end XXXX. So guidance million EBITDA the the of million about on pointing middle the range, right XXX at to sitting now you’re

a So over $XX a period. just bridge in that’s two-year EBITDA about million

the on FY of EBITDA FY larger to expected guided of some briefly expect be you there million? where but to that 'XX you be in of in to $XX at 'XX, components more may that to million you come bridge $XXX of you soon from is where it which have So share the later touched in quarters, can it least

Lance Tucker

Jeff, that. it’s Lance. I’ll start with

of given back in kind longer-term to details, of August was when out at 'XX, of lot the if So that. you’re going we you haven’t see guidance a put it look

of current going be got in obviously years. going go you’re we’re to we’re change have should want any and to primary what think sales But you the hopefully be myself is us the that. few expect Lenny to from to That’s driver we what again the both of though I from to lot don’t hearing and line. expect in a guidance to a I what take doing confidence on So is into where

putting to going that, to that addition we’re on we of In noted units. have a be kind bigger focus

imagine, lot done this want don’t as stuff into I engineering beyond you that. of would to is a point. So of most go But financial details at

So driving going Box unit operationally economics to we’re sales. the and focusing be

Jeff Farmer

And in pivoted the think I’m just more Combo, one Big calendar goes promotional sort correctly Really phrasing to fourth then somewhat you of what like Chicken to the Okay. quarter. do the if back Sandwich looked and this fiscal down I follow-up $X.XX that.

in I the the think fiscal was There it fourth combos quarter. a lot was quarter. in fiscal $X.XX more the $X.XX combo third

So if there in the bundled consumer Are or And don’t better different little value something promotions, purchases you terms response of to resonate promotions? fiscal response, fall was a these of ones about to third versus aware and be how guys. traffic versus of in quarter you thinking little the do a drive add-on the add-ons? of bit these play about should quarter down bit you see there terms responds for traffic bundled any the something then the potential in we is those other fiscal the of on have fourth some that in promotions value consumer

Lenny Comma

Sandwich people Really many Big patties The offer and wouldn’t Instagrammable pretty this ran actually sort the And took past in allowed Really how say Chicken quarter-to-quarter. of of we from it’s Sandwich. And four something up-sell Chicken that we as we something create that did this to there this we that is pictures up patties. was giant, four is to the and a incredible So shift changed time we around. ordered

say So and it; look quarters that about that this. But looked the a similar gone very like fourth that second, way bundles third, with continue was we’ll we’ve I’d fun. of kind lot

then We $X.XX slightly lower certain that with but up range, that to that particularly have out up-sell in And proceeds. potential are at you start there you products, a are build when the may added generally retail. look

Operator

Silberman comes Lauren Suisse. question Credit next Our with from

Your is open. line

Lauren Silberman

the Thanks the wanted question. unit to about growth ask strategy. for I

to going forward. growth spoke You accelerating

or on classes. any trending periods markets greatest the on And see you been new where markets? do new have where opportunities? Is payback color the existing it So then some of

Lenny Comma

growth unit new right. First, rate,

Lauren Silberman

Yes.

Lenny Comma

years infill are or we type that markets And beyond We’ve new growth like second this It broken of a we’d couple completely out to But the more see couple of newer opportunities as well. to the completely development or half markets we drive on underpenetrated. of guiding be without catch question. the in markets next little didn’t really new to into I of markets side. got to are the next here filling was in years, up enough you that able get expansion as

it, you I’d could repeat it. If appreciate

Lauren Silberman

Sure.

any in on payback where provide classes? the new If the just trending periods have can you been color

Lance Tucker

Lauren, it’s Lance.

gone far another, degree is opening a detail. haven’t detail. into I payback level strong. comparing of we with as been that What of We stores to level confidence that But can pretty haven’t of the high as say given one vintage new indoor periods, have

Lauren Silberman

And your just main with on Okay. tech areas are their to level spending, investments then of the just tech spending the comfortable in we’ve focus competitors, as relates it you then some digital 'XX? are seen technology on your what ecosystems? fiscal And

Lenny Comma

particularly mixed a there. see on seen in actually brands bag out We that hospitality, some pretty really focused the We’ve drive-thru. are

of we’ve with tech high consumer highest industry. some tech loyalty even they exact opposite. the not driving the very the not their And in associated and but in relationship might the then high the drive-thru be they’re or but And dining AUVs going tech management, at some room, seen investments are of

menu, to That they’re the and investment going incentives your engaged the over the they’ve likely garner communication to management up and continued long view that well afforded, is acquisitions general likely that’s the term. be the stayed investing pick to restaurants. of the going consumer fuel is that if the are then that need need way that they the players some pay. into look tech them big at is in allows order their the over lot a a they other tech do to going The relationship dose can time that’s Some to have apps as allow it level in business ahead will going QSR want And both we and to tech, in brand. return other as of through healthy currently in things of

to. think you’re consumer technologies time looking of but for and don’t at us We best it emerges Overall, see technology, before other business. a at convenience-oriented we invest. to of time commit we’ll this at sort looking But place those acceptance are over it’s we’ll how

Lauren Silberman

all Okay, right.

Operator

from Our next with Securities. Matt question Guggenheim comes DiFrisco

open. Your line is

Matt DiFrisco

the wonder just just you. well brands respect mentioned Some in far you just from a away steady follow of hyper-growth the the the you’re lot comment Thank of had then have you you about similar it’s as on some that moving seeing of little that? than a I context starting the more to on a other your as into a you well? peers in some if prior – settle color was initially. quarters of can of volatility. the comp, With of of couple consumer know what growth volatility near-term bit volatility sort bit said could somewhat us give more guys state ups. I all normal. seeing as Is little maybe as guidance? questions growth of delivery, the historically And that more to into that than as a a rather type factoring of also Are have

Lance Tucker

it’s Matt, Lance.

let in. So that start I’ll with start jump this and your I’ll one. delivery Lenny I’ll with On question,

have to see continued We growth.

certain platforms as providers. by into – percentage used specifics go to over of we some to want unit that now growth in we grow see a but couple our delivery couple XX% additional have do providers I have continue We deliver units who’s our to. of We delivery over that higher have online do some of as area coming count. their that than providers on Meaning, and a and covered units who, the have don’t are –

a So to we ramp delivery. him… turn standpoint, current let and are volatility From one over to Lenny that continued seeing I’m and going

Lenny Comma

volatility. It associated see the and market and We’re thought even maintained we same consumer sort space. in it a we’ve marketplace even times, asked that. waning. everyone seen quarters, the of what we’ve ramp some been out It’s and was lot mostly where in see up there seeing of continues. do hyper-competitive after often discounting there’s volatility competitive We’ve it with we the And in comp value

trying with seeing component can’t decline some over standpoint. So where sandwiches healthy you a pretty, the quarter-by-quarter and they’re we’re penny I’d competitors of with – biggest and be from from seen trend There to the associated swings big various performance that’s a is right significantly a those transactions seeing what a traffic in high of competitors likely high time of healthy pretty to and associated volatility see promotions now have say food that and come profit out some quality establish lot that marketplace drove that, with transactions in sales. that costs very We’ve of the but are discounted. things are certainly leading

our And so stakeholders what’s very down. that’s marketplace, and our product marketplace, internally on marketplace intrude volatility. then anything with more is trying dayparts drives to the franchisees as slowing hyper-competitive a offers. because is say with aggressive They on various be caution well very going what aggressively both attuned no would consider in the as to one still to just in we stay what our very like to the biggest also other categories are I’d than

Matt DiFrisco

said not menu rationalizations as some going then menu or faster. already reason follow on talked reviewed I slower Dunkin that than times peers Are Simplification been X know a the And have slowdown just has I have past, for up mind. in to people to an that some might really simplification. have speeding up service, guys alternative? comes you and and the be about think that’s other or be brands a means there some Okay. usually your SKU to Typically – well? observing you been when that larger minute of

Lenny Comma

some menu look doesn’t necessarily impact rationalize SKUs, consumer. bread don’t necessarily we’ve products. have still cheeses, into particularly a recognize that to we variety our at the things in of a ingredient these Yes. We having built will can things these the of on definitely have that great the get without Even counts when consumer all positive carriers, there. We sauces, some

are lot can procedure, seeing formulate it brought seeing close some of see on we earlier our product, is of those And procedurally, hold product; are entity, type look it easier things a equipment from handful operations, our positive just make we’re rationalization. folks our both some cook a we at that they proteins, our for tweaks restaurants And the also and to to in going ways and that the way. our hard example, in cook-to-order as we’re I SKU some running kind outside we’ll we So with the we’re are although what a the products, that was But some of we we about crews. and our to already the testing results. referring way

operators. about that – really most So thing bullish also bringing about and the in going this It’s outside we I’m think perspective probably the effort. has one this good it’s because feel forward it’s I been refreshing necessary been to

Rachel Webb

right. All

have I for think question. more time we one

Operator

BTIG. comes Saleh The question with from last Peter

Your line is open.

Peter Saleh

and to XXXX other maybe menu alluded considering you think I items for Lenny, trending. what’s Thanks. Great.

the tested of adding on menu burger some you that. considering? guys Just something to thoughts your Have in thoughts your us Is that you give plant-based around it? So XXXX. are

Lenny Comma

certainly We in may plant-based. hamburger. form may not of come to it or open a And are the

things testing lot it everybody doing a make formulating to various marketplace of burger just are We what Jack great of to versus may in not for those with there very things. product currently categories for burger are the us We’ve mix. go doing we’re that plant-based side sense And some else the the a variety lines the high versions of and us more is product is ideas, but is got some in Box and player. on menu

in craveable stay. it. to just think We important. to Box because totally Jack these we that as at it’s So, just open be la here across just à will we I’d explore plant-based really categories say multiple versus I with But and are we snacks look want plant-based do the for sides think the sandwiches, or our items to hamburger. importantly carte combos and/or

Peter Saleh

to may follow curious, that a is that Got I you’re up. step that expecting is just labor the up does a And I’m inflation said or year know service? wage be any from you the incremental next wage high-single on side. adding just it, the meaningful okay. hours all then a improve you that inflation digit, include stores to

Lance Tucker

Lance. It’s one. I’ll Pete. that Hi, take

wage is the pressures come to such see certainly So from increases low see unemployment, the already going with in concentration with lion’s that of mandated just as also some share said. it heavy minimum I’ve we probably a you’ll California continued and

the actual see restaurants, deployment as any within As far changes material there. don’t labor we

Rachel Webb

a thank morning I you to all this great February. in you So holiday talk joining us and have season. for you We’ll hope

Operator

attendance. your This conference. you for today’s concludes Thank

lines. your disconnect may You

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